Your Two Bits

After last week’s post about the budget template, it made me think of another template I love that comes as part of Microsoft Excel: a loan or mortgage calculator, with an amortization table. I created a little demo video showing you how to find it and explaining the basics of how it works.

I found this template after complaining to my friend, Ben, about needing a tool that would help me figure out how long it would take to pay off my mortgage. Near the beginning of the mortgage, I paid an extra $30/month towards principal, then later started paying something more like $70. There were also a few random cases where I had a freelance job or got a tax return and would put that money towards the mortgage principal. There weren’t any loan calculators out there that provided a simple way to accommodate those variations in additional principal payments. My friend suggested I make one in Excel. When I went to do that, I discovered there was a template that did exactly what I wanted. Thanks, Ben!

If you have a loan or mortgage, you really need to try this out. I find it highly motivating for paying off debt, because it makes it easy to see exactly what will happen if you apply different amounts. The video explains it all.

Feel free to share your two bits if you are aware of any enhancements or even of other templates you have found useful.

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Every day people ask me, “Michael, how do you do it? How do you keep it all together?”

I humbly reply, “Budget. It’s all in the budget.”

…And then their eyes glaze over.

If I weren’t such a fan of the budget, the word budget would be a conversation killer. Hopefully you’re still with me. Rather than extolling the virtues of a budget, which I will likely do in another post, I am providing a simple budget template.

You can download the template (I’ve also added it to the Resources page) and view a short video explanation I made about how it’s laid out and how to take advantage of its being a quarterly budget.

Quarterly Budget Template (MS Excel)

This budget covers one quarter—3 months—at a time. I’ve found that with an annual budget, it’s too hard to anticipate future expenses, and with a monthly budget, there’s not enough flexibility to work with expenses that vary from month to month. Some months have car registration, others have insurance premiums due, and others have Christmas. Most budgeting templates we found addressed the problem by distributing infrequent expenses over the year, such as $10 every month for an annual $120 car registration fee. But that was hard to keep track of. Our solution came with the quarterly budget.

First we determined our average monthly income, and then made sure that our budgeted monthly expenditures—including our savings and debt payoff—did not average more than our monthly income. If our income was $3500 a month, one month we might budget $3400, one month $3500, and one month $3600, but averaged together we would be on track. We figured that each quarter, we would have different large expenses come up, but that different large expenses would come up during different quarters, so that overall things would balance out.

One of the keys to this budget system is that you have a savings account into which all your income goes. Before a given month, you should have enough money saved there to transfer to your checking account all the money budgeted for that month. And then during that month while you’re going about your business, you are earning more money that is deposited into your savings account, ready to be transferred to checking for the following month. As you record expenses during the month, you are able to see how much money you have left as the month’s end approaches, and either reign in spending, responsibly put away more money to invest, or go on a shopping spree, depending on how the month is going.

If you don’t already have a budget or if you’re looking for ideas, this could be very useful. Feel free to share your two bits on budgets or on ways to enhance the template.

Remember, a budget can be painful or empowering. It’s up to you to decide which.

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